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"Amortization"
A fully amortized mortgage is a mortgage
that must be paid off by the end of its term. To amortize
means to decrease the principal balance on the mortgage by a
monthly payment of both principal and interest. An
amortization schedule, which gives the borrower a layout of their
payment, is given to every borrower. It is enclosed in every
loan package.
Amortization terms can
vary but generally accepted terms run in 5 year increments, from 10
to 50 years. You might see this expressed as 30 year fixed rate
mortgage where 30 years is the amortization term
Amortization tables are
mathematical tables used to calculate the total monthly payment on a
mortgage.
Here is an example of an amortization
table for a $200,000 loan at a 5% interest rate for 15 years (180
months):
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